Debt and capital accumulation in a two-sector model with non-traded goods

The paper examines optimal debt and capital accumulation for an open economy which faces an imperfect international capital market. The major finding is that the optimal pattern of debt and capital accumulation is affected by relative factor intensities. Factor intensities determine whether substitution or complementary relationships exist between debt and capital. The relationship between the country's net wealth and its two components financial and productive are also determined by factor intensities.     

Development policies in the presence of unemployment and non-traded intermediate goods

The role of non-traded intermediate goods has not been satisfactorily studied in the context of a developing economy with involuntary unemployment. In this paper we examine this phenomenon within the framework of a Harris-Todaro-type migration model. We show that the presence of the intermediate good creates a strong linkage between the rural and urban regions. Under certain reasonable assumptions on factor intensities, this linkage causes an increase in the price of the urban good to benefit the intermediate good as well, and an expansion in the urban output to drive an expansion in the production of the intermediate good. Finally, wage subsidies to urban firms increase the unemployment rate, despite the ameliorating effect of the inter-sectoral linkage.We would like to thank M. Ali Khan, Bela Balassa, Will Carrington, and the members of the J. H. U. Trade and Development and Summer Seminars for advice and comments. We would also like to thank two anonymous referees for pointing out several errors in an earlier draft. Any remaining errors are, of course, ours.     

International migration,non-traded goods and economic welfare in the source country

"This paper examines the economic effects of emigration in a source country producing both traded and non-traded commodities. It is shown that, even if the economy faces fixed terms of trade, emigration can still affect the welfare of the non-migrants, and the direction of the effect in this context will always be negative." The focus is on migration from developing countries.     

Real exchange rate dynamics in the presence of non-traded goods and transaction costs

This paper studies the role of non-traded goods and transaction costs in accounting for the puzzling behavior of real exchange rates. We show that introducing the transaction costs and non-traded goods in an otherwise standard competitive model dramatically improves its ability to rationalize observed real exchange rate dynamics.     

International migration,non-traded goods and economic welfare in a two-class economy: A reply

This paper sketches a formal model of an economy producing traded and non-traded goods in which two classes of individuals are differentiated, each owning different endowments of capital and labor and allocating different proportions of their income to the consumption of each commudity. The effects of emigration on prices, income distribution and the real income of each class is then examined.     

Risk and regulation: An empirical test of the relationship

The relationship of the variance of rates of return and estimates of systematic risk to the nature of the regulatory paradigm is examined for Bank Holding Companies in Australia. Strong evidence is found to support the hypothesis that shareholder risk is negatively related to the intensity of regulation.     

A note on international migration,non-traded goods and economic welfare in the source country

"This note extends the work of Rivera-Batiz to the case where capital is collectively owned and the decision to emigrate entails both a withdrawal of labor services from the source-country and the surrender of the ownership of capital. In this framework, which seems to have wide real-world relevance for socialist, labor-managed and peasant economies, it is found that emigration helps increase the welfare of the non-migrant. This result, which seems quite robust to its specifications, is exactly the opposite of that of Rivera-Batiz and points to the need for great caution in drawing policy conclusions with regard to issues pertaining to emigration."     

Institutions, motivations and public goods: An experimental test of motivational crowding

Contributions to public goods can be motivated by intrinsic factors such as warm glow altruism and fairness, as well as extrinsic incentives such as sanctions and payments. However, psychological studies suggest that formal extrinsic incentives may crowd out intrinsic motivations. In an experimental study of individual contributions to a public good we find that suasion crowded in voluntary contributions, while an extrinsic incentive in the form of a regulation led to crowding out. This has implications for the design of public policy where ranges of motivations are present.     

Foreign ownership, non-traded goods and the effects of terms of trade changes on national welfare

This paper extends the theory of international trade in the presence of foreign ownership to incorporate non-traded goods. It is shown that, with non-traded goods, national and aggregate welfare might move in opposite directions in response to a terms of trade deterioration even when national and aggregate trade specialization patterns coincide.     

An assessment of the empirical magnitude of option values for environment goods

This paper provides an empirical assessment of the magnitude of option values relative to expected surplus using a model presented by Larson and Flacco (1992). Option values and option prices are computed for both simulated data sets and actual estimates of recreation demands. Results indicate that option values engendered by price and income uncertainty are generally quite a small percent of expected surplus.     

Induced innovation: an empirical test

A method is developed to empirically test the hypothesis of induced innovation as it has been specified and used in the theoretical literature. A strong and a weak version of the hypothesis is tested using sectorial data from the USA, Canada, Germany, France and the UK. The strong version tests for the exact dependency of the relation between the change in factor-productivities on the one hand and relative prices and actual factor-productivities on the other hand. The weak version only tests for the direction of this dependency. In all countries the weak hypothesis is accepted in all sectors except in ‘electricity, gas, and water’. The strong hypothesis is accepted in about half of all sectors. It is rejected only in sectors, in which the degree to which progress is intentional is low.     

On the (mis)specification of seasonality and its consequences: An empirical investigation with US data

It is well known that mis-specification of a trend leads to spurious cycles in detrended data (see, e.g., Nelson and Kang (1981)). Seasonal-adjustment procedures make assumptions, either implicitly or explicitly, about roots on the unit circle both at the zero and seasonal frequencies. Consequently, seasonal-adjustment procedures may produce spurious seasonal variation and other statistically undesirable effects. In this paper we document for a large class of widely used US quarterly macroeconomic series the effects of competing seasonal-adjustment procedures on the univariate time-series properties of the adjusted series. We also investigate which procedures are most appropriate given the properties of the data. Overall, we find very significant differences and evidence that several U.S. macroeconomic time series contain a mixture of deterministic and stochastic seasonal components.     

Using base-year data with empirical scenario models

In quantitative scenarios, empirical models are frequently used to provide estimated values for variables. However, in the base year the values are known, and will almost certainly be different from the values estimated by the model. It is shown that the gaps between observed and modeled values (the residuals, or shift factors) in the base year can be used to provide estimates of the residuals in the scenario that improve the performance of the empirical model. A self-consistent estimator is proposed, and is shown to be effective by applying it to specific examples.     

The demand for relational goods: empirical evidence from the European Social Survey

How are happiness and the demand for relational goods and status goods related? Using cross-sectional data from the European Social Survey, this relationship is investigated for European countries. The main result is that the demand for relational goods is not reduced by high opportunity costs of time. Rather, both wage rate and income are positively related to the frequency of social contacts. In contrast to financial means, while status is more important for happiness in richer European countries than in poorer ones, social status is not decisive for the frequency of meeting friends regardless of the home country’s economic well-being. Thus, while no crowding out of relational contacts by status could be observed, relational goods are even boosted by material well-being.     

Targeting public goods to the poor in a segregated economy: An empirical analysis of central mandates in rural India

While local governments are increasingly being vested with control over funds for public goods, concern over the capture of decentralized funds by local elites has led decentralization to be combined with central mandates which require a certain proportion of funds to directly benefit the poor. If local capture is pervasive, however, central mandates may not be effective. Despite the popularity of this combination of decentralization and centralized control, there is little empirical evidence which separately identifies their effect on investment in public goods, and hence assesses the effectiveness of central mandates. This paper provides such evidence, using data collected by the authors for the North Indian state of Punjab, an economy where economic conditions facilitate such an analysis. We find that central mandates are effective, enhancing intra-village equality in expenditure on public goods. This finding informs the debate on the equity effects of centralized versus decentralized programs.     

An empirical test of monopoly behaviour: an application to the Hardwood case: a comment

A recent article in this journal, Alexander (1988), tests whether the exchange of price information in the 1921 Hardwood case was a means of fixing prices or a way of coping with costly information. Alexander makes two serious errors. Both errors involve the incorrect use of a technique used to measure price-cost margins to determine the extent to which an industry is monopolistic, competitive, or somewhere in between. I reestimate Alexander's model correcting his two errors. In addition, I improve his data set. Alexander's conclusion that the price association was pro-competitive, although drawn incorrectly, is shown to be correct.     

Sources of productivity growth: an empirical analysis with German sectoral data

Many theoretical analyses of the sources of economic growth focus on knowledge spillovers and scale economies to explain growth endogenously. The contribution of this paper is to shed some light on these arguments by an empirical investigation based on a production function framework. Sectoral production functions are estimated with annual German data of 51 sectors from 1960–90. The estimates reveal that both a pure Solow growth model and a Solow model augmented with human capital cannot account for the observed productivity increases. The model should be extended by allowing for inter-industry spillovers and scale economies at the aggregate level, as well as for scale economies associated with human capital at the sectoral level. The business cycle affects observed productivity changes in the short run and in the long run.     

An empirical test of the segmented labour market theory for the Netherlands

In this paper an orthodox segmented labour market theory (SLM theory)is tested by means of the data provided by the research project, Quality of Labour 1977 (Zanders et al., 1977). The segmented labour market theory is restricted to the dual labour market approach, although a major extension is taken into account (a primary segment consisting of two tiers). The segments are created by making use of an objectivemethod. Nine quality characteristics of jobs are taken into account. A number of logit estimations are carried out to test the competing theories of human capital and the segmented labour market. The conclusion is that although discrimination in the labour market appears to exist, the SLM theory has to be rejected.